Incidents:

On March 28, 2024, Ada Smart issued the 2023 annual results announcement: in 2023, the company achieved revenue of 472 million yuan, -27.47%; realized net profit of 0.29 million yuan, -81.44% year on year; realized net profit of 13 million yuan without return to mother, or -91.29% year on year.

The company announced an equity incentive plan. The total number of stock options under this incentive plan is 2.7623 million restricted shares granted by the plan, accounting for 3.42% of the company's total share capital. The first corresponding performance assessment year was 2024-2026, and the revenue targets were 59/679/746 million yuan, respectively.

Investment highlights:

Industry sentiment suppresses customer procurement needs, and the company countercyclically increases strategic investment to lay out the future.

The consumer electronics industry continued to be sluggish in 2023. Although the boom picked up at the end of the year, there was little innovation in the superposition electronic terminal product process, and the procurement volume of the company's major international customers and their supply chain manufacturers was affected. As a result, the company's product shipments and acceptance in 2023 decreased year-on-year, and revenue continued to be under pressure. Revenue of 472 million yuan, or -27.47% year over year.

Against the backdrop of the continuing downturn in the consumer electronics industry, the company bucked the trend and continued to increase investment in product category expansion, R&D, and marketing. In particular, in terms of R&D and marketing, the cost rates reached 21.22% and 27.71% respectively in 2023. While continuing to strengthen the company's competitive strength in underlying technologies such as core components and key software, and consolidating major consumer electronics customers, it also increased its expansion efforts to major customers in the automotive electronics, semiconductor, and new energy industries.

The fluid control business is remarkable, focusing on internal R&D, improving quality, and expanding external markets and increasing efficiency. In 2023, the company continued to promote product upgrades and category expansion: in addition to upgrading fluid control equipment and launching a series of new products such as the milligram precision gluing machine series, it also successfully developed products such as high-end precision machine tools and ultra-fast femtosecond lasers, further enriching the company's product range. In addition, the company is also actively promoting downstream market development: for major customers, on the basis of deepening the competitive advantage of the SMT electronic assembly process, FATP post-assembly passed customer process verification and completed small-batch delivery in 2023. In addition, the company has cooperated with customers in the US, Vietnam, Mexico and other places to complete organizational restructuring; new application areas:

The company has continuously strengthened its efforts to develop major customers in the domestic general market. It has successfully entered the supply chain of leading international automotive electronics customers such as Tesla, BYD, JP, and India's TATA and leading domestic customers in the automotive electronics, semiconductor, and new energy markets, and has also made breakthroughs in the supply chain of leading semiconductor packaging customers.

The ADA-H intelligent platform continues to be upgraded, and flexible line switching between different work stations has been realized in actual applications. The company continues to promote the upgrade of the ADA intelligent platform. In 2023, it carried out independent development of Z-axis motors, hot plugging of process modules, and two-level decoupling and three-level decoupling of software and hardware. It has achieved support for Windows and Linux dual-system operation, and full adaptation of common platforms and process applications, so that it can complete plug-and-play use of various process modules, support more detailed process requirements, and truly transform from dedicated functional equipment to general digital platform equipment. At present, the intelligent flexible assembly equipment developed by the company based on the ADA-H intelligent platform has been partially shipped. It has been applied to scenarios such as TWS headphone dispensing technology, industrial power supply assembly test lines, medical reagent ball implantation, etc., and has achieved flexible line switching for different workstation processes in actual applications.

Release an equity incentive plan to demonstrate the company's confidence in development. The company released the 2024 Restricted Stock Incentive Plan (draft). The incentive plan involved 91 incentive recipients for the first time, and the number of restricted shares to be awarded was 27.623 million shares; the company-level performance assessment targets were: the company's revenue target values for 2024-2026 were not less than 5.9, 6.79, and 746 million yuan, respectively, and the trigger values were not less than 566, 6.23, and 654 million yuan, respectively. While the equity incentive plan motivates employees, it also reflects management's confidence in the company's long-term development.

Profit forecast and investment rating: As a leading domestic fluid control equipment leader, the company is increasing strategic investment, strengthening underlying technology, developing new customers, continuing to promote the R&D and application of ADA equipment, and firmly laying out the future against the backdrop of sluggish industry prosperity. In the early stages, the company continued to be affected by the slump in the industry, so we adjusted the company's profit forecast. We expect the company's revenue for 2024-2026 to be 6.51, 8.51, and 1,106 billion yuan, respectively, achieving net profit to mother of 0.96, 1.25, and 202 million yuan. The corresponding PE is 24X/19X/11X, respectively. We are optimistic about the company's long-term development and short-term performance flexibility, and maintain a “buy” rating.

Risk warning: Consumer electronics recovery falls short of expectations, development of new customers falls short of expectations, ADA products fall short of expectations, risk of iterative technology updates, and risk of exchange rate fluctuations.